New Filing Steps for 2026 Bankruptcy

In Chapter 7, the trustee takes a look at your assets and compares their equity to the exemptions you declare. Equity is the worth of the residential or commercial property minus what you owe on it. If your equity in a home, vehicle, or other residential or commercial property is fully covered by exemptions, the trustee generally leaves that asset alone.

That analysis often determines whether Chapter 7 is safe for somebody with built-up equity in Michigan realty or a paid-off vehicle. In Chapter 13, exemptions still matter, however in a different method. Rather of selling non-exempt residential or commercial property, the law typically requires that unsecured creditors receive at least as much through your strategy as they would have gotten if you filed Chapter 7 and your non-exempt properties were offered.

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For instance, a Michigan property owner with equity above the homestead exemption might choose Chapter 13, make a greater month-to-month payment for a set variety of years, and still keep your house. Because the choice in between Michigan and federal exemptions can tilt the balance between Chapter 7 and 13, this is not something to rate.

If Chapter 7 looks dangerous however the customer's earnings can support a sensible Chapter 13 payment, the suggestion may move towards Chapter 13 to protect hard-earned residential or commercial property. How each chapter treats your particular debts frequently matters more than any abstract pros and cons list. Unsecured debts, such as charge card, medical bills, payday loans, and many individual loans, generally receive similar outcome in both chapters, but through different paths.

In Chapter 13, unsecured creditors frequently get a share of what you pay into the strategy, which may be anywhere from a small percentage to the full quantity, and the staying balance can be discharged at the end if you complete your strategy. Protected financial obligations involve residential or commercial property that acts as security, such as a home mortgage on a home or a lien on a car.

Financial Support for 2026 Chapter 13 Filers

Keeping a protected property typically involves staying current on payments and, in many cases, signing a reaffirmation agreement that keeps you personally liable on that particular loan after personal bankruptcy. If you are far behind and can not capture up quickly, giving up the residential or commercial property in Chapter 7 eliminates your personal liability for any deficiency balance after the loan provider sells it.

You can spread out home mortgage or vehicle loan defaults over a three to five-year plan, which is called treating arrears, while likewise resuming your routine month-to-month payments. In some circumstances, Chapter 13 also allows a decrease of specific lorry loan balances to the automobile's current worth, a concept referred to as cramdown, though in-depth rules apply.

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Concern and nondischargeable debts, such as current earnings taxes, kid support, spousal support, and a lot of student loans, stand in a different classification. These are normally not erased in Chapter 7, though the automatic stay can pause some collection while the case is pending. In Chapter 13, these debts are often paid completely through your plan before unsecured financial institutions get anything.

At Hensel Law Workplace, PLLC, a detailed creditor list is mapped to these categories so you see precisely which financial obligations will be eliminated, which should be paid, and which chapter handles them better. Knowing for how long each chapter lasts and what daily life looks like throughout the case can make the choice feel less abstract.

Soon after filing, the automatic stay generally stops garnishments, claims, and most collection calls. You go to a conference of creditors, typically called the 341 conference, where the trustee asks questions about your documentation and financial resources. After that, you generally await deadlines to pass and for the court to provide a discharge, unless the trustee requires more details or is checking out non-exempt assets.

Financial Support for 2026 Chapter 13 Filers

You submit the case, and the automatic stay enters into effect, stopping garnishments, foreclosure sales, and a lot of collection activity. You propose a payment plan, begin making regular monthly payments to the Chapter 13 trustee, and attend a 341 conference and, in numerous cases, a verification hearing where the judge thinks about whether to authorize the plan.

Many Michigan filers are shocked by how structured but manageable the daily reality can be when the strategy is practical. In Chapter 7, your main responsibilities are to be truthful, supply documents, attend your meeting, and finish a needed financial education course. In Chapter 13, the included responsibilities include staying with a spending plan, making every strategy payment on time, and reporting substantial earnings modifications.

Once you understand how each chapter works, the next action is lining that up with your objectives. One core tradeoff is speed versus structure. Chapter 7 moves faster and usually involves no long-lasting payment responsibilities, which appeals to Michigan renters and property owners who are current on their home loans and have primarily unsecured financial obligations.